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Is OPEC a Cartel? Evidence from Cointegration and Causality Tests

S. Gurcan Gulen

Year: 1996
Volume: Volume17
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol17-No2-3
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Abstract:
Were the energy shocks of the 1970s engineered by an effective cartel acting to share the market by controlling output and influencing oil prices? If OPEC was an effective cartel sharing the market among its members, there would be a long run relationship between each member's production and total OPEC output. One would also expect OPECs production to significantly affect the price of oil. These implications of cartel behavior are tested via cointegration and causality tests. The likely effects of regime changes are dealt with using techniques developed by Perron (1989). There is evidence of output coordination among members of the organization, especially in the output rationing era (1982-1993). This is also the only period in which the causality from OPEC production to the price of oil is statistically significant.



Regionalization in the World Crude Oil Market

S. Gurcan Gulen

Year: 1997
Volume: Volume18
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol18-No2-6
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Abstract:
According to Weiner (1991), the world oil market is said to be unified' if prices for same quality crude oils from different regions of the world move together and regionalized otherwise. This hypothesis of Weiner is kept unchanged. However, we are more interested in the efficiency implications of a regionalized world oil market than its policy implications as discussed by Weiner. Specifically, if these prices deviate from each other, i.e., the market is fragmented, there will be arbitrage opportunities for crude oil traders which would render the market inefficient. In this paper, the regionalization hypothesis is investigated via cointegration tests using both spot and contract prices for fifteen crude oils. Three groups of similar quality crudes are formed based on API gravity and sulfur content. Tests of cross-group co-movement which provided evidence for significant quality differences between heavy and light crudes further supported our groupings. Then the co-movement of prices is tested within each group. The crash in 1986 is explicitly dealt with following methods described in Perron (1989). Results indicate that the world crude oil market is unified over the 1980-95 period.



Regionalization in the World Crude Oil Market: Further Evidence

S. Gurcan Gulen

Year: 1999
Volume: Volume20
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol20-No1-7
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Abstract:
This paper extends the tests of Weiner's (1991) regionalization hypothesis in Gillen (1997), which employed monthly data, to weekly data from a more recent period (1991:4-1996:52). The higher frequency data allows us to analyze the co-movement of prices for similar quality crude oils from different regions of the world in shorter periods of time. In addition to the full sample, two subperiods (one of falling prices, 1991:4-93:52 and the other of rising prices, 1994:1 96:52) are analyzed. The results are usually similar to those from Gillen (1997) which rejected regionalization, but the comparison of the two subperiods leads to some interesting conclusions. First, prices (including that of Saudi Arabian Heavy) appear to be more in line with each other during tight market conditions than during weak market conditions. Second, the global benchmark role of WTI and UK Brent is reinforced.





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